<TABLE cellSpacing=0 cellPadding=2 width="100%" bgColor=white border=0 xmlns:msxsl="urn:schemas-microsoft-com:xslt" xmlns:js="http://cbs.markewatch.com/xsl"><TBODY><TR><TD width="100%">The deal, which will immediately boost earnings and save the combined company hundreds of millions of dollars, had been widely expected as excess capacity, falling commissions and the need to build assets in order to generate fees drive consolidation in the industry.
Ameritrade (AMTD: news, chart, profile) shares ended the day up $3.05, or almost 21%, at $17.87. The stock added another 14 cents in after-hours trade.
Executives from both companies said in a conference call with analysts and investors, said the deal will create a company that offers services to customers seeking only the basic online service to the more costly "hand holding" service offered through a combined branch network of advisers.
"Building our own branch system is one thing," said Ameritrade Chief Executive Joe Moglia said. "Inheriting one is another."
Moglia and Toronto-Dominion Bank Chief Executive Ed Clark also hinted that the combined company would be ready to pounce on an acquisition.
E-Trade Financial Corp. (ET: news, chart, profile) which made an unsolicited bid for TD Waterhouse amid the talks, may be a target. With a $5 billion value in the market, E-Trade will be about half the size of TD Ameritrade, the combined company.
"Don't assume consolidation is over," Moglia said.
In exchange for the U.S. brokerage business of TD Waterhouse U.S.A., TD Bank Financial Group (TD: news, chart, profile) will receive about 32% ownership in TD Ameritrade.
Ameritrade shareholders will receive a special cash dividend of $6 a share, to be funded with additional Ameritrade debt, excess cash and from capital contributed to TD Waterhouse U.S.A. by TD Bank Financial Group prior to closing.
Also as part of the deal, TD Bank Financial Group will buy Ameritrade's Canadian brokerage operations for $60 million cash.
Ameritrade CEO Joe Moglia will run the combined company.
Fox-Pitt Kelton analyst David Trone lauded the Ameritrade/ TD Waterhouse combination.
"For Ameritrade, it looks like the company has chosen a merger with TD Waterhouse that has superior strategic benefits, in the form of diversifying the business away from active traders and into the investor space, at the expense of fewer cost synergies," Trone said in a note to clients.
Speculation about the deal for Ameritrade to buy the online brokerage unit of Toronto Dominion has been swirling around the market for weeks, amid a confirmed bid by E-Trade (ET: news, chart, profile) to buy Ameritrade.
Some analysts had suggested that a takeover by E-Trade would make more sense for Ameritrade from a purely financial standpoint than a deal with TD Waterhouse, but Ameritrade has resisted any plans to surrender control of its business.
An E-Trade spokeswoman declined to comment.
In early trading, Ameritrade had climbed by more than 5% as investors thought the company could be in play. However that sentiment faded by the afternoon.
"An E-Trade/Ameritrade combination would have created a company with large cost synergies, but represented a 'doubling down' in the active trader space," Trone said.
The deal comes as brokers face price cuts, slack investor interest in the stock market and lower commissions threaten margins.
Jaret Seiberg, a financial services analyst with the Stanford Washington Research Group, predicted that a deal would pass regulatory muster but that the Justice Department may ask the companies for extra information. Ameritrade and TD Waterhouse would corner a combined 42% of the online brokerage market, Seiberg said.
Scott Talbott, vice president of government affairs at the Financial Services Roundtable, said the deal should be good for consumers and that buyouts and mergers are a normal part of the business.
"It's a relatively new industry, so you're going to see expansion and contraction," Talbott said in an interview.
Federal regulators will have to approve the acquisition. A Justice Department spokeswoman had no comment. A new entity would have to register with the Securities and Exchange Commission, but the SEC would not get involved in approving or rejecting a merger like this one.
Shares of E-Trade Financial Corp. added 84 cents, or 6.5%, to close at $13.75. Toronto-Dominion shares rose 54 cents, or 1.2%, to $44.15.
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Steve Gelsi is a reporter for MarketWatch in New York. MarketWatch reporter Robert Schroeder contributed to this article
Greg Morcroft is New York news editor of MarketWatch</TD></TR></TBODY></TABLE>
Ameritrade (AMTD: news, chart, profile) shares ended the day up $3.05, or almost 21%, at $17.87. The stock added another 14 cents in after-hours trade.
Executives from both companies said in a conference call with analysts and investors, said the deal will create a company that offers services to customers seeking only the basic online service to the more costly "hand holding" service offered through a combined branch network of advisers.
"Building our own branch system is one thing," said Ameritrade Chief Executive Joe Moglia said. "Inheriting one is another."
Moglia and Toronto-Dominion Bank Chief Executive Ed Clark also hinted that the combined company would be ready to pounce on an acquisition.
E-Trade Financial Corp. (ET: news, chart, profile) which made an unsolicited bid for TD Waterhouse amid the talks, may be a target. With a $5 billion value in the market, E-Trade will be about half the size of TD Ameritrade, the combined company.
"Don't assume consolidation is over," Moglia said.
In exchange for the U.S. brokerage business of TD Waterhouse U.S.A., TD Bank Financial Group (TD: news, chart, profile) will receive about 32% ownership in TD Ameritrade.
Ameritrade shareholders will receive a special cash dividend of $6 a share, to be funded with additional Ameritrade debt, excess cash and from capital contributed to TD Waterhouse U.S.A. by TD Bank Financial Group prior to closing.
Also as part of the deal, TD Bank Financial Group will buy Ameritrade's Canadian brokerage operations for $60 million cash.
Ameritrade CEO Joe Moglia will run the combined company.
Fox-Pitt Kelton analyst David Trone lauded the Ameritrade/ TD Waterhouse combination.
"For Ameritrade, it looks like the company has chosen a merger with TD Waterhouse that has superior strategic benefits, in the form of diversifying the business away from active traders and into the investor space, at the expense of fewer cost synergies," Trone said in a note to clients.
Speculation about the deal for Ameritrade to buy the online brokerage unit of Toronto Dominion has been swirling around the market for weeks, amid a confirmed bid by E-Trade (ET: news, chart, profile) to buy Ameritrade.
Some analysts had suggested that a takeover by E-Trade would make more sense for Ameritrade from a purely financial standpoint than a deal with TD Waterhouse, but Ameritrade has resisted any plans to surrender control of its business.
An E-Trade spokeswoman declined to comment.
In early trading, Ameritrade had climbed by more than 5% as investors thought the company could be in play. However that sentiment faded by the afternoon.
"An E-Trade/Ameritrade combination would have created a company with large cost synergies, but represented a 'doubling down' in the active trader space," Trone said.
The deal comes as brokers face price cuts, slack investor interest in the stock market and lower commissions threaten margins.
Jaret Seiberg, a financial services analyst with the Stanford Washington Research Group, predicted that a deal would pass regulatory muster but that the Justice Department may ask the companies for extra information. Ameritrade and TD Waterhouse would corner a combined 42% of the online brokerage market, Seiberg said.
Scott Talbott, vice president of government affairs at the Financial Services Roundtable, said the deal should be good for consumers and that buyouts and mergers are a normal part of the business.
"It's a relatively new industry, so you're going to see expansion and contraction," Talbott said in an interview.
Federal regulators will have to approve the acquisition. A Justice Department spokeswoman had no comment. A new entity would have to register with the Securities and Exchange Commission, but the SEC would not get involved in approving or rejecting a merger like this one.
Shares of E-Trade Financial Corp. added 84 cents, or 6.5%, to close at $13.75. Toronto-Dominion shares rose 54 cents, or 1.2%, to $44.15.
</TD></TR><TR><TD>
Steve Gelsi is a reporter for MarketWatch in New York. MarketWatch reporter Robert Schroeder contributed to this article
Greg Morcroft is New York news editor of MarketWatch</TD></TR></TBODY></TABLE>
